Every business has its metrics which helps organizations to measure their performance and help them to improve their revenue and profits. Hotel metrics are an important component which makes it possible to keep track of the revenue stream and understand the performance of a hotel.
Each of the most used revenue management KPI’s has their own value, although they are more useful when viewed in context, alongside one another. By using key performance indicators, hotel management can get a clearer idea about the performance of their business and make informed, data-driven adjustments to pricing and strategy.
Still, no matter which metric is used, the goal stays the same: to increase revenue and profits.
In this two-part article series, I will explain the most critical metrics that companies in the Hotel Industry should track. It is important to understand tools and track their viability as well as identify where we can make the easiest and most impactful improvements to improve our business results dramatically.
I will exclude Food and Beverage, Meeting and other revenue areas deliberately as I will cover their key metrics separately in another article.
First the basics;
1- Total Available Rooms
Total Available Rooms = Total number of rooms – Number of rooms out of order/not in service/out of inventory
Total available rooms represent the number of rooms available multiplied by the number of days in the reported period.
Alone it might not mean too much, however, it provides necessary information which we use for other inventory related calculations such as RevPAR, GOPPAR.
2- Average Daily Rate (ADR) or Average Room Rate (ARR)
ADR = Rooms Revenue / Paid Rooms Occupied
Hotel ADR measures the average price paid per room. This metric basically assesses the total guest room revenue for a specific period versus the total amount of room revenue paid and occupied hotel rooms within the same time frame.
The ADR is a key measure to identify property’s financial performance, as well as to compare the hotel’s performance to its competitors.
3- Average Occupancy Rate (Occ%)
Occupancy % = Paid Rooms Occupied / Rooms Available
Occupancy % = Revenue per Available Room / ADR
Occupancy is a percentage of the available rooms occupied for a specific period. It is calculated as total paid rooms occupied divided by total available rooms.
Usually, the higher the occupancy the better because the company is earning more revenue than companies with low occupancy. However, this may not always hold true if the company cuts prices to boost its occupancy. The rate is also key to the operational side of the business to ensure proper staffing and inventory.
4- Average Length of Stay (ALOS)
ALOS = Total Occupied Rooms / Total Number of Bookings
The ALOS metrics makes it easy to identify the length of stay of guests at your hotel. It is vital to implement a length of stay requirement in revenue management. Once implemented effectively, length of st